AI in India | Chapter 4: Real-Time Applications of AI in the Indian E-commerce & Retail Industry

The inclusion of AI is going to change the e-commerce & retail ecosystem’s landscape forever as it holds the potential to build data-driven, large-scale solutions that cater to India’s unique needs and wants. With huge investments pouring in along with proper governance, the Indian e-commerce & retail ecosystem could grow to a market value of $11.4 billion by 2025.

Artificial Intelligence (AI) has a significant impact in revolutionizing many industries, and retail is no exception. The new decade is going to be more crucial for retailers than ever before, with a significant operational shift from in-store to online, increasing new technology disruption. Furthermore, with a sudden escalation in digital adaptation due to ongoing pandemic, retailers are turning to new AI-driven technological advancement to have a competitive advantage in the market. According to a report by Jupiter Research Study, global retailer spending on AI would be increasing to $7.3 billion annually by 2022 — up from $2 billion spent in 2018.

The inclusion of AI has changed the e-commerce & retail landscape in a way that was once hard to imagine. E-commerce and Retail are one of the few industry segments where the adaptation and applications of AI are being seen as meaningful and in an actionable manner. From customer discovery to supply chain management, every step of the e-commerce & retail ecosystem can be automated by AI to yield better productivity and return of investments. For example, with AI/ML-powered solutions, retailers can create data models to derive actionable insights and build predictive or prescriptive decision engines. These can then be used by retailers for demand forecasting and inventory management, enabling them to make better data-driven decisions. As a result, retailers worldwide are investing in this advanced technology to improve the customer experience while driving up operational efficiency and productivity. According to Capgemini’s Research Institute’s latest AI in retail report, AI in e-commerce & retail has the potential to save $340 billion annually by 2022.

Automating several processes and operations and making them more efficient, AI in e-commerce & retail isn’t just a stepping stone — using it right could help retailers have a competitive edge over the market. From product discovery using reliable data to catalogue and inventory management to the personalized customer shopping experience — AI has the ability to impact the e-commerce & retail sector in a holistic end-to-end manner.

In this article, we’re set out to explore the following main objectives:

• Impact of integrating Artificial Intelligence in the Indian ecosystem
• AI’s influence on the Indian E-commerce & Retail Ecosystem
• Major players to leverage AI in Indian e-commerce & retail space, and
• Need of AI in the E-commerce & Retail Industry

AI in India — an overview

Over the last several years, India has diligently built digital highways to bring equitable access to technology across the country. The emergence of transformative new technologies enables India to build on top of these existing infrastructure and leverage technology for equitable social growth.

Artificial Intelligence and Machine Learning hold both tremendous promises for India, from a technology capability perspective, as well as lay out new ways of addressing some of the crucial roadblocks we face as a country and society. Being the world’s second-largest population, India has a large technology skilled workforce and the diversity of both use cases and data sources. AI & ML-driven technologies enable the intelligent combination of these complementary strengths to build data-driven, large-scale solutions that cater to India’s unique needs and wants.

The Government of India has been working on developing a comprehensive AI ecosystem for the country. With extensive Planning at the Policy Level by NITI Aayog, which is expected to drive AI contribution of AI in India’s GDP growth, India’s potential for the global growth of AI is remarkable. By the end of this year, India’s AI market would value $6.8 billion at a 6.6% growth rate.

Impact of integrating AI across sectors in the Indian ecosystem

With the accelerated digital uptake and reduced adoption gap due to the COVID-19 pandemic, India has entered into a new phase where the narrative has shifted from asking whether AI is viable to declaring that AI is now a requirement for most organizations trying to have a foothold in the global market. Thus, there is a palpable momentum in the Indian economy — both from the government and the private sector to promote a flourishing AI-based ecosystem in the country.

With private investments pouring in and government enabling AI’s real potential by providing proper governance, more and more organizations across multiple sectors/industries have already started leveraging AI-based technologies to optimize existing processes and derive better outputs. Over the past few years, the AI vertical in India has seen momentous investments from some of the prominent firms across the sectors of IT Services, Technology, Software and Hardware, Chip and Semiconductors, and Captive forms across BFSI and Healthcare setting up Research & Development and AI Centers of Excellence. Also, the Domestic firms, specifically in Banking, Energy, and Telecom, are driving the growth of AI for the domestic industry segments. Moreover, with recent advancement in next-gen technologies such as 5G in Telecom, an automatic driving system in Automotive, Connectivity across Smart Cities & Utilities sectors, IoT platforms in Engineering and Manufacturing — the scope of AI collaboration across sectors in India is expected to increase. These cross-industry and segment partnerships are driving AI growth furthermore.

International firms such as Microsoft, Amazon/AWS, Intel, Samsung, Bosch, Siemens, to name a few, and domestic firms such as Reliance Group, TCS, Wipro, Infosys, Tata Group, ITC, to name a few, are pouring in investments in AI domain which is driving the growth in terms of intellectual property, capabilities, and revenue. Moreover, the prestigious institutes of the Indian Institute of Technology(s) are developing AI incubators for various government services and AI-based startups.

Because of such investments coming in for the AI domain, NITI Aayog, Nasscom, Indian IT firms, Educational Institutions, and various Engineering & Technology enterprises are transforming India into a hub of AI research and development. According to a report by Tech Channel, the Indian e-commerce & retail ecosystem could possibly grow at a CAGR of 13.8% to a market value of $11.4 billion by 2025.

Until recently, AI and MI-based research centres across segments like e-commerce and retail, Engineering and Technology, Seni-conductor, Sensor Devices, to name a few, were relatively small in terms of revenue contribution and its capability. Now, with the inclusion of AI-driven technologies, these three sectors/segments are expected to carry the majority of growth in the Indian domestic AI market in time to come, with AI in e-commerce and retail in India expected to grow in value to $5.25 billion within the ongoing decade.

Let’s take a look at how, in an Indian ecosystem, AI is set to change the e-commerce & retail sector forever.

How AI is changing the e-commerce & retail industry in India

Digitization of the e-commerce and retail industry has been going on for years. With about a 5% stake in India’s total AI market share, AI in this sector is expected to grow exponentially in years to come and has the potential to make it a major contributor segment in India’s AI-driven market. Even though less than 10% of the Indian e-commerce & retail ecosystem is organized, there is an immense opportunity for digitalization with AI taking centre stage.

E-commerce & Retail businesses have seen an increased speed, efficiency, and accuracy across every branch of the ecosystem, credit to improved data collection/cleaning techniques and advanced big data analytics systems that are helping companies make data-driven business decisions. None of these insights would be possible without the internet of things (IoT), and most importantly, artificial intelligence. As the e-commerce & retail scenario worsened amidst the pandemic, retailers’ alignment with AI-backed strategy can boost their agility.

Artificial intelligence-based solutions are proven to be exceptionally useful to those retailers who collect and process their customer’s information for internal use. Using machine learning techniques, AI can provide valuable insights into data that retailers can use to offer personalized customer experiences. But AI and ML-driven implementations are often misunderstood in an e-commerce & retail setup as conversational agents that suggest products and answer customer’s questions, helpful in-store robots, or automated processes like checkout or stocking shelves. While these applications should be a disruptive factor in future, it’s highly unlikely that these factors would be the first wave of AI’s impact on the e-commerce & retail sector.

So, what exactly do AI-based applications in e-commerce & retail look like?

Here are the top use cases and real-time examples of how AI in the e-commerce & retail industry is reshaping the entire industry.

• AI Chatbots to assist with customer service:

The AI-supported conversational assistant uses natural language processing to help digital platforms with customer service, improved searching, send notifications/promotional offers about new collections, and also provide product recommendations. By the end of 2021, 80% of brands worldwide are already using or going to use AI chatbots, while 85% of the customer interactions are being handled without human agents. For example, a Mumbai based startup ChatGen.ai is a smart conversational sales and marketing chatbot, which once deployed to any e-commerce platform, communicates effectively with its prospects, customers and internal employees with effective dialogues to reduce TAT & improve productivity.

• Product Discovery:

In a customer-centric digital or retail shopping journey, Product Discovery is the first and most crucial step. In a digital landscape, discovery begins with the site search. Search engine users are high intent customers who are searching for a product with a buying intent. A simple yet straightforward product discovery process can set users to endear a retailer or e-commerce platform. The results of a search need to capture the intent of the query and show relevant products. With accurate, consistent, structured data and advanced analytics, the problem is no longer about the relevance of the results to the search but more about the relevance of the results to each individual. Here AI-powered retail personalization search can help tailor the search results by boosting specific affinities for each shopper. Each click can be used to learn about the shopper’s preferences and converge to a hyper-relevant search bar that understands the customer. Vue.ai, an end to end AI solution across e-commerce & retail function, a brand of Mad Street Den Brand, uses real-time and historical behavioural data to build personalized journeys that lead to better product discovery and improved customer conversions.

• In-store assistance:

AI-empowered retail spaces recognize customers and adapt custom pricing, product displays and service through biometric sensors in real-time to provide a custom shopping experience for every in-store visitor at scale. Delhi-based apparel & fashion startup, Rent It Bae has a smart screen installed inside the store, which allows the customer to get all the necessary details about the product’s price, fabrics, rental charges, availability of sizes and much more by just placing the merchandise in front of the smart screen.

• Product Visualization/Visual Merchandising:

To provide a rich customer experience, e-commerce retailers are in need to showcase their product in a way that helps their customer understand it better. Flat lay images or ghost mannequins for product visualization are outdated techniques and are rapidly changing by AI-powered augmented reality platforms to showcase products based on viewers ethnicities, pose, and size, thus increasing shopper engagement, conversion and reducing returns. In India, a leading jewellery retailer Tanishq has partnered with Milestone Brandcom, an outdoor specialist agency, to install augmented reality (AR) kiosks at Delhi and Bangalore airports to elevate the jewellery shopping experience. The kiosk used VR enabled technology called ‘MirrAR’, which lets customers virtually try out jewellery as many times as they wish to. The AR platform has been created in collaboration with StyleDotMe — a delhi-based startup focused on the innovative application of AR and AI technologies for customer experiences.

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• Visual Search:

E-commerce platforms enabled with the Artificial Intelligence Visual Search feature allow users to upload images and find similar products based on their shape, colour, or pattern. It enables customers to have a near-life, immersive experience throughout their shopping journey. It is a revolution in how retailers present their products to the customers. A Mumbai-based Fashion e-commerce platform, Fynd, has added a Chrome extension — Fynd Now — that users can use for search on their app. They can upload an image from their phone’s gallery to link a visual from the web and discover it or similar products on the platform. Using AI, the feature identifies the product in the image/video and recommends the same or similar product from the Fynd catalogue. It also provides users with relevant product information and links to buy, thus easing the purchase barrier.

• Voice Search:

Retailers across the globe are using deep learning-powered speech recognition software to assist customers with quick and simple voice search in a language they are most comfortable with. Customers can ask for details of desired products without typing anything. Liv.ai, a Bangalore-based speech recognition software, converts speech-to-text by using Powerful Neural Network Models with exceptional accuracy and minimal latency. The API recognizes nine major Indian Languages — English, Hindi, Bengali, Punjabi, Marathi, Gujarati, Kannada, Tamil and Telugu. Retailers currently use this solution for providing an end-to-end conversational shopping experience to their users.

• Customer behaviour prediction:

Applying AI-driven forecasting techniques can help retailers in predicting customer behaviour pre/post-sales. AI-enabled platforms use relevant indicators such as consumer sentiment, available credit, employment factors, wages, etc., to predict the probable customer behaviour at a scale. It helps them prepare for market opportunities by identifying potential growth markets and product lines. Customer360, a platform by Bangalore-headquartered startup Manthan, is a cloud-based customer analytics platform that helps aggregate and analyze transaction, loyalty, and campaign data from conventional and digital data. This product uses descriptive, predictive, and prescriptive algorithms for the marketer to understand the customer’s purchasing behaviour.

• Customer Satisfaction Tracking:

By recognizing and interpreting facial, biometric, and audio cues, AI interfaces can identify shoppers’ in-the-moment emotions, reactions or mindset and deliver appropriate products, recommendations or support — ensuring that an e-commerce & retail engagement doesn’t miss its mark. It, thus, helps in building a healthier relationship with the customers. FaceX and ParallelDots are examples of such India-based startups that provide facial recognition-based solutions converting normal brick and mortar stores into smart stores to cater to the customers and enhance their shopping experience.

• Dynamic Pricing:

AI-powered platforms can assist retailers in setting prices of their products and visualize the likely outcome of their pricing strategies. In a highly competitive e-commerce & retail landscape, retailers rely on these solutions, which set the price of a product for a user based on multiple indicators such as seasonal trends, customer sentiments, product demand, characteristics, the release date of new models of the same item etc. Mumbai-based Greendeck.co is one such startup that empowers online retailers and brands to make better pricing and buying decisions.

• Cart Abandonment Emails:

Cart abandonment is an event when a user visits an e-commerce website, adds at least one product to the shopping cart and exits the website without purchasing the product. According to Forrester research, retailers happen to lose over a staggering $18 Billion in yearly sales revenue each year due to card abandonment. While this is a huge opportunity for e-commerce brands to tap into, retailers have now turned up towards AI-based solutions to deliver cart delivery emails to their existing users. These tools recommend visually similar products and styling suggestions personalized by understanding each shopper’s visual style profile. This not only recovers the cart but also tells the shopper that the retailer understands them. Zia, an AI-powered assistant created by ZOHO, is a CRM that assists retailers/marketers to design personalized emails for their customers.

• Virtual fitting rooms:

Virtual fitting rooms are a great way for customers and store staff to save time and find the perfect product with all the elements perfectly matched in a span of minutes. Delhi-based Lenskart offers 3D face modelling, a virtual trial service, which allows consumers to virtually try the frames. The technology measures the user’s face from multiple angles to virtually map the face, and then when the user tries on a frame, they can swipe on the image to turn the head to the left and right to get a view of the glasses from different angles. This online 3D face modelling trial provides preferences and historical data to make frame selection faster, more effective and fun for the buyers.

• Inventory Management & Operational Optimization:

By mining insights from the marketplace, consumer, and competitor data, AI in e-commerce & retail creates better demand forecasting. This results in formulating better business and marketing strategies along with effective supply chain planning & optimization. Antuit.ai, an AI demand forecast and omnichannel inventory optimization platforms, assist retailers with maximum predictability from the available data at any level of time, product and market hierarchy. Thus, helping these brands to make faster, smarter, and more profitable business decisions.

Top businesses leveraging AI in the Indian e-commerce & retail ecosystem

There are big players of Indian origin that are leveraging AI-powered tools in conceptualizing, designing, and executing end-to-end digital & in-store customer experience. With the advancement in technology and its adoption, AI now manages the entire supply chain for the e-commerce and retail sector and provides product recommendations — enhancing customers’ shopping experience across the digital and online platforms.

The companies leveraging AI-empowered solution across the e-commerce and retail sector include:

Domestic e-commerce players:

1. Flipkart

Flipkart, India’s biggest e-commerce startup by valuation, leverages AI and ML models to analyze petabytes of data which unveil profound insights on consumer tastes and preferences. This strategy has played a crucial role in Flipkart’s growth since 2007. Flipkart leverages these insights to improve its online shopping experience, including which product it offers and where it should focus its innovation efforts.

In 2017, Flipkart launched the AI for India initiative to harness artificial intelligence to resolve bottlenecks unique to the e-retail ecosystem in India and build their platform for the next billion users. With the AI for India initiative, Flipkart is applying artificial intelligence more aggressively to build upon service differentiation, better user experience and automate backend processes.

Last year, Flipkart partnered with Microsoft and adopted Microsoft Azure as its exclusive public cloud platform. The company has planned to use AI, ML, and analytics capabilities in Microsoft Azure, such as Cortana Intelligence Suite and Power BI, to process its petabytes of data generated daily by users for innovative merchandising, advertising, marketing, and online customer experience for its user that hasn’t been imagined before. For example, in its AI-powered initiatives, Flipkart’s AI project ‘Mira’ aims to provide an in-store experience of having a sales associate at scale — but via AI and through digital channels.

2. Myntra

Myntra, a fashion e-tailer now owned by Flipkart has been leveraging AI for some time now to become the leader in their segment. These initiatives are centred around the product, experience, and logistics.

The AI division in Myntra is handled by a team called Rapid. The team comprises more data scientists than it does designers. And their AI/ML-based algorithms tell them just what designs/products are sure to sell. The team uses an AI-driven software known as Vorta.ai that helps the team in reducing the design time by fast iterations and advanced analytics. They even have launched T-shirts with fully machine-generated designs.

Myntra is also using ML algorithms to improve the payment drop off rates of online transactions. These algorithms are designed to detect and analyze thousands of success and failure payment patterns and then figuring out the best gateway from which a payment needs to be routed to ensure maximum success rate always. These models are also used in product recommendations to its users.

Myntra created ‘Sabre’, an AI-based returns system that enables faster refunds for customers who demonstrated good buying-return behaviour. By analyzing a customer’s past returns patterns, ‘Sabre’ can detect which customers are genuinely returning the shipments and which ones are attempting fraudulent activities.

Domestic Retail Players

1. Infiniti Retail Limited (Croma)

Infiniti Retail Limited (Croma) is a 100% subsidiary of TATA Sons and now has more than 6 million customers. Croma — India’s leading large format electronics retailer, is also the first omni-channel electronics retailer uniting the three customer touchpoints: a Croma store, the online electronics shop and a fully functional mobile app. Croma has a network of 97 Croma stores spread across 20 cities.

Croma uses an MIT-backed Infinite Analytics, Inc. (IA) platform to acquire new customers by targeting the right audience on the right digital platform. IA’s personalization platform allows consumers to discover related and new products serendipitously, based on an understanding of the user, the product catalogue and the contextual data. Croma also leverages Locus, a logistic planning and optimization AI-powered software, which helps in optimizing retail logistics using AI.

According to a case study, the Tata Croma experienced a staggering 217% increase in conversions by utilizing data analytics and AI-powered insights.

2. Shoppers Stop

Shoppers Stop is India’s pioneering retailer and, effectively, the highest benchmark in modern retail. Spread across 210 multi-format stores in 39 cities. It is leveraging big data analytics and AI-backed platforms through First Citizen, its loyalty program. First Citizen enabled the retailer to study the purchasing patterns of its customers. Based on actionable insights provided, the retailer creates targeted marketing campaigns and promotions, which results in additional sales revenue.

Retail Aggregators:

1. BigBasket

BigBasket, India’s biggest online grocery supermarket, has been going all out to engage modern shoppers, aided in this mission by new-age technologies. Bigbasket uses Artificial Intelligence, Machine Learning, and analytics to simplify logistics and boost customer experience. By leveraging the best-in-class AI/ML algorithms combined with real-time traffic and delivery-related data, BigBasket has maintained excellent efficiency even with its fleet size and routes expanding exponentially in recent years. The ML engine accurately maps end customer locations that help build dynamic route clusters depending on the load, thus eliminating manual intelligence and decision-making. The ML-based vehicle allocation engine also recommends the number and types of vehicle needed, thereby enabling maximum vehicle utilization.

Bigbasket also uses analytics tools such as Tableau and Power BI to process large chunks of data and convert them into actionable insights, which enhances overall customer experience — from product recommendations to developing a pricing strategy.

Bigbasket has also invested in AI and deep learning to develop smart kiosks known as BB instant. These kiosks have AI-powered machines connected via an app. The customers visit the smart store and place their desired order via the app. The customer can then walk away immediately with the cart items — having a safe, hygienic, and contactless shopping experience. At the same time, the bill is received by the customer through the app itself. The AI system is powered with in-built techniques for recognizing the purchased products by employing the image scanning principle through advanced deep learning solutions. As a result, the system interprets and gives the right product to the customer and handles the procedure of availability and billing.

2. OLX Group

OLX Group, an online marketplace company, having more than 500 million monthly active users on its platforms. To provide a seamless customer experience, personalized news feeds to users such as posts from different locations and not just posts near users. The platforms gather data from multiple user touchpoints and run analytics. The in-house tech team at the company utilizes data to train the ML models, which powers OLX’s platform to showcase relevant listings to users. In their latest app update, they have introduced many features backed by artificial intelligence to create a delightful experience for their users and build a cohesive platform for the largely fragmented ecosystem. On the app, OLX’s AI-backed ‘Progressive Chat’ feature offers helpful prompts to complete the transaction easily.

The company has also launched a flagship program called AI Accelerator. All the employees at OLX India have been given quarterly targets to learn different aspects of artificial intelligence (AI) and their regular functions. The aim of this program is to make sure that every member of the team understands the value of AI and machine learning (ML) for the business in the future.

Boutique AI and Analytics:

1. Cartesian Consulting

Cartesian Consulting is an analytics consulting firm that helps businesses improve customer value, marketing spends, and business decisions. It provides analytics on projects spanning Customer Analytics, Media and Attribution Analytics, Promo Optimization, Demand Forecasting, Pricing and Promo Optimization, Store analytics, Retail Analytics, and AI’s application to business needs. Its AI-powered product, Solus.ai, enables hyper-personalized customer engagement at scale by aggregating data generated across customer touchpoints, along with product, store and other relevant information.

Brands like Pantaloons and Chaayos leverage this platform to enhance their e-commerce & retail customer experience and improve investments’ overall return.

2. Mad Street Dan (MAD)

Chennai-based Mad Street Dan (MAD) creates new experiences based on computer vision and Artificial Intelligence. MAD’s Vue.ai is a vertically integrated artificial intelligence stack for retail. It’s an AI-powered digital experience management platform for e-commerce. It uses image recognition and data science to extract retail data, analyze it along with user behaviour and in turn help retailers make better decisions and personalize the customer experience across different channels. Vue.ai’s algorithm analyzes the extracted catalogue data with user behaviour. It helps retailers’ marketing/ product/cataloguing teams automate their processes, reduce costs, drive conversions, and increase revenues.

Retail Brands like TATA CliQ, Nicobar, Milaner, among others, are leveraging this platform to curate a personalized customer experience while also enabling end-to-end retail automation across site merchandising, product, eCommerce & marketing operations.

The future of AI in the Indian e-commerce & retail ecosystem

The potential for AI in the entire e-commerce and retail sectors is tremendous. Though this sector in India is largely unorganized, as much as 85% in 2019, the opportunity for digitalization is immense with AI set to play a pivotal role, especially as the economy looks to recover from the ongoing covid-19 pandemic.

The e-commerce & retail sector in India is estimated to be $600 billion and one of the top five markets in the world in terms of economic value. According to the Indian Brand Equity Foundation (IBEF) data, the Indian re-commerce & retail sector is poised to double by 2024 to be valued at $1.4 trillion. The industry is undergoing a significant transformation due to changing consumer behaviour, growth of organized e-commerce & retail and entry of multiple global players.

With the entry of new players in this segment, such as Dunzo, Grofers, Milkbasket, JioMart, and the expansion of Food aggregators, such as Zomato and Swiggy, into Retail Aggregation, the entire e-commerce & retail sector is expected to grow exponentially in the next few years.

Conclusion

The adoption and use of AI represents an exciting leap forward for many in the Indian e-commerce & retail ecosystem. AI capabilities are leveraged across all the functions of e-commerce. Ranging from market segmentation, ad displacement, product discovery, product targeting, pricing, customized digital platforms to inventory management, supply chain optimization, quality, and merchandise classification, AI and ML-based applications are being deployed across the entire value chain of e-commerce and retail experience.

AI is helping the e-commerce & retail sector drive both the customer-facing aspects of their business and automate the increasingly mechanized and growing supply chain backend that enables online sales and physical retail supply. In general, e-commerce & retail believes that AI’s long-term role in the segment is inevitable. At the same time, the successful use of AI requires balance: greater automation but with equal emphasis on user engagement and skills development.

AI’s influence on the Indian e-commerce & retail system will be incredible, but India has some way to go as the majority of the sector is highly unorganized. That presents a massive opportunity in itself, but it depends on how the adoption and execution occur.